EFFECTIVE SPARE PARTS MANAGEMENT -...

15th INTERNATIONAL OPERATIONS & MAINTENANCE CONFERENCE IN THE ARAB

COUNTRIESUNDER THE THEME: “SMART MAINTENANCE” CONICIDE WITH THE 15TH ARAB MAINTENANCE

EXHIBITION

TOMÁŠ HLADÍK

Logio

EFFECTIVE SPARE PARTS

MANAGEMENT

2

1) Go for preventive maintenance!

2) Eliminate process problems

3) Segment your spare parts portfolio

4) Evaluate spare parts criticality

5) Spare parts management starts with good forecasting

6) Use special methods for intermittent demand items

7) Consider the whole life cycle of your equipment

8) Implement a good information system for spare parts and maintenance inventory management

Eight rules for efficient SPM

3

Go for preventive maintenance

4

STANDARD

PLANNED

PLANNED

MAINTENANCE

CORRECTIVE

(REPAIRS)

UNPLANNED

PREDICTIVE

PROACTIVE

DEFFERED

CORRECTIVE

PLANNED PROCUREMENTINVENTORY

MANAGEMENT

Go for preventive maintenance!

80% 20%?

5

Preventive or corrrective?

Number of preventive vs corrective tasks

Donwtimes caused by failure maintenance

Total maintenance cost

6

Eliminate process problems

7

SPARE PARTS PROCESS

8

Eliminate process problems

SP NEED

IDENTIFICATION

No direct responsibility of maintenance engineers/technicians for

“their” items and spare parts levels.

REQUEST

FOR ORDER

RFO created by someone else, not the technician who requested part.

The step of RFO may not be necessary in the process.

APPROVAL

How often are orders approved? Who approves?

Approving in IS workflow or by signing a paper copy? Or both?

Approving both RFO and then issued order again?

Too many approvers, complicated procedure and hierarchy.

Approving on high levels of management.

PROCUREMENT

Insufficient information available to procurement, poor spare parts

identification – the buyer hardly knows what should be bought,

additional communication with maintenance technician is needed.

Missing or incomplete procurement specification in the IS.

9

Eliminate process problems

CONSUMPTIONSlow spare part issues in case of sudden need.

Issued spare parts are not consumed in fact. What happens then?

Consumption of external material even in case the part is on stock.

WAREHOUSE

RETURNS AND

REFURBISHED

SPARE PARTS

Refurbished parts return to warehouse while new are bought.

Accounting price of refurbished items is much higher (or lower) than

the non-realistic value of items on stock.

Problematic or impossible returns of parts issued but not consumed.

Insufficient control of parts dismantled from the maintained object

(the information system has no information about these).

RECEPTIONProblems with missing (undelivered) documentation for the received

material (certificates, declarations).

Lost spare parts documentation – only “paper-based” archiving.

WAREHOUSING

Insufficient identification of spare parts in the warehouse.

Problems to find items stored.

Inventory count discrepancies, physical stock different from

information system data.

Non-real value of stock in the information system.

Out-of-system stocks.

Sklad NDHow do you store bearings?

Sklad NDHow do you store bearings?

16

Where are the spares? An example from a large carmaker

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

200,000,000

01

17

3

01

89

4

01

89

8

02

89

4

02

89

8

04

86

3

04

89

3

04

89

7

07

49

4

07

49

8

08

18

0

08

88

1

08

93

6

08

98

4

09

89

0

09

89

6

12

88

4

12

89

6

13

49

0

13

49

4

13

49

8

13

75

8

14

86

3

14

89

4

14

89

8

1P

49

3

1P

49

7

1P

89

6

1P

94

3

1P

99

9

21

89

4

21

89

8

22

49

8

22

89

8

23

49

9

23

89

6

24

89

3

29

99

0

30

89

2

39

89

2

39

89

7

52

99

9

Spare parts inventory value [?]Foundry

Pressshop

Machining, enginesCental warehouse

Welding lines

Warehouses A-Z

17

SPARE PARTS PROCESS

Who is responsiblefor spares stock?

Who/how oftenapproves?

Procurementspecification missing

Insufficient sparesidentification

Are returns to warehouse allowed?

18

Spare parts process – benchmarking

Internal best practice

19

Comparison of inventory turnover

PLANT 1 PLANT 2 PLANT 3 PLANT 4

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

1 2 3 4

20

Segment your spare parts portfolio

21

Service level x locked-in capital

Inventoryvalue

90 % 95 % 98 % 99 % 100 %?

Service level / availability

What items are really important?

What items are really important?

Dominant categories C and D are typical forspares

On-hand inventory value

Consumed quantity

22

ABC analysis – on hand inventory value

Value of available inventory

23

ABC analysis – consumed quantity

In spare parts, C and D categories typically prevail

Quantity

24

Spare parts inventories segmentation – consumption frequency(in quantity)

25

Spare parts inventories segmentation – consumption frequency (in value)

26

WHEN?

HOW MANY?

WHEN?

HOW MANY?

Strategic segmentation of spare parts

CONSIDER CONSIGNATION

CONSIDER CONSIGNATION

CONSIDER CONSIGNATION

CONSIDER CONSIGNATION

BUY

BUY

BUY

BUY

CONSIDER CONSIGNATION

CONSIGNATION

BUY BACK

BUY

TYP

E O

F FO

REC

AST

CONSUMPTION FREQUENCY

27

Example of buyback application

20 pieces were purchased for turnaround in 2010 for 41.2 M CZK, but these spare parts

were not used during the turnaround and will be stored until the next turnaround in 2014.

Buy-back in this case can save 9 M CZK (360k EUR) on storage and locked-in capital cost

Between shutdowns

28

FSN and VED classification

V

E

D

F

S

N

Fast-moving

Slow-moving

Non-moving

Vital

Essential

Desirable

29

30

Evaluate spare parts criticality

Effects of failure

Production losses

Links to asset register, critical assets (RCM)

Delivery time

Repairability

Number of items in use

Maintenance planning

Part lifespan

Failure probability

Failure characteristics

Failure anticipation

Price

% cost of capital

Cost ofinventory

holdingFailureprobability

Impacts ofspare part unavailability

Leadtime andother

parameters

Evaluate spare parts criticality

31

𝐶𝑖𝑛𝑣 = 𝐶𝑢𝑛 ∗ 𝐿𝑇 ∗ 𝑓

10 000 EUR x 10% 100 EUR / day 100 days 1 per 2 years

1 000 EUR 5 000 EUR

KEEP ON STOCK

<

Criticality calculation

INVENTORY HOLDING UNAVAILABILITY LEAD TIME FAILURE RATE

32

Criticality assessment phases

Economicalassessment

Technician

Hold on stock

Potentiallycritical part

Do not stock

Advanced methodsto set optimal levels

Criticalityassessment

Technician ConsumeSell orScrap

Optimum SP stock

33

Application for criticality assessment

34

Login a heslo

35

Postupné hodnocení kritičnosti

36

37

38

39

Spare parts criticality analysis result

Criticality score

Spare parts items

40

41

Spare parts management starts with good forecasting

Quantitative methods x Common sense

Quantitativemethods

Commonsense

MAKE EFFICIENT!MAXIMIZE!

42

Quantitative methods x Common sense

Quantitative methods

Common sense

Unexplained / Random

Uncertaintyof future

consumption

Maximize

Make efficient

Minimize

43

Forecasting step-by-step

Visualisation of time seriesFor better understanding of the time series

Calculation of accuracyAbsolute and relative errors, evaluation on testing season

Calculation of forecasts using all available methods

Selection of the best methodBest accuracy and reliability

1

3

2

4

44

What forecasting method is best for spare parts?

1% 1% 2%3%

5%

9%

79%

Konstantní model

Regresní model

Holtovo exp. vyrovnání

Jednoduché exp.vyrovnáníKlouzavý průměr

Winters

Forecasting není možný

Constant model

Regression model

Holt’s exp. smoothing

Simple exp. smoothing

Moving average

Winters

Forecasting impossible?

???

45

46

Use special forecasting methods for intermittent demand items

Týd

enn

í sp

otř

eby

ND

Historie týdenních spotřeb (týdny)

4 13 17 300

1

2

3

4

81 18 25 2726

32

Spare parts – intermittent demand

Weekly consumption history (weeks)

Wee

kly

spar

e p

art

con

sum

pti

on

(p

iece

s)

QUESTION: What reorder level should be set in order to ensure required availability of a spare part?

47

Týd

enn

í sp

otř

eby

ND

Historie týdenních spotřeb (týdny)

4 13 17 300

1

2

3

4

81 18 25 2726

32

BootstrappingBootstrapping = random sampling from history of consumptions.

SP consumption for lead-time period is sampled from history

Sample 1: Consumption in6 weeks = 5 pcs

Wee

kly

SP c

on

sum

pti

on

Weekly consumption history (weeks)

Example: SP lead time is

6 weeks

48

Bootstrapping

Vzorek 2: Spotřeba za

6 týdnů = 0 ks

Týd

enn

í sp

otř

eby

ND

Historie týdenních spotřeb (týdny)

4 13 17 300

1

2

3

4

81 18 25 2726

32

Sample 2: Consumption in6 weeks = 0 pcs

Weekly consumption history (weeks)

Spar

e p

art

con

sum

pti

on

(p

iece

s)

49

Bootstrapping

Vzorek 3: Spotřeba za

6 týdnů = 12 ks

Týd

enn

í sp

otř

eby

ND

Historie týdenních spotřeb (týdny)

4 13 17 300

1

2

3

4

81 18 25 2726

32

Sample 3: Consumption in6 weeks = 12 pcs

Weekly consumption history (weeks)

Wee

kly

SP c

on

sum

pti

on

50

Bootstrapping

Vzorek 4: Spotřeba za

6 týdnů = 2 ks

Týd

enn

í sp

otř

eby

ND

Historie týdenních spotřeb (týdny)

4 13 17 300

1

2

3

4

81 18 25 2726

32

Sample 4: Consumption in6 weeks = 2 pcs

Weekly consumption history (weeks)

Wee

kly

SP c

on

sum

pit

on

51

Če

tno

sti s

po

tře

b v

jed

no

tliv

ých

inte

rva

lech

(z

e s

imu

lace

)

Spotřeba během LT – intervaly (ks)

0 5 10 15

60 000

0

30 000

Ku

mu

lati

vní p

ravd

ěp

od

ob

no

st s

po

tře

by

100 %

Example of 100 000 simulations of SP consumption

Target: SP availability (Service level) = 99%

OPTIMUM INVENTORY = 9 PCS

Consumption during leadtime (pcs)

Cu

mm

ula

tive

pro

bab

ility

of

con

sum

pti

on

Freq

uen

cies

of

con

sum

pti

on

(fro

m s

imu

lati

on

)

52

Bootstrapping application – a case study

99.9% availability

Original inventory: 17 000 EUR(49 pcs)

Spare part lead-time: 32 days

Recommended inventory

29 pcs

10 000 EUR

Savings

7 000 EUR

Intermittent demand

53

Bootstrapping in spare parts management information system

54

Minimum level 2 pcs

55

Life cycle thinking:Consider the whole life cycle of your assets

PROCUREMENT

MAINTENANCE

RENOVATION

COST

PROFIT?PROFIT

MAINTENANCE CREATES VALUE!

ASSET LIFE CYCLE

56

Asset life cycle (Kari Komonen, EFNMS EAMC)

INVESTMENT UTILIZATION

$$

57

PROCUREMENT

MAINTENANCE

RENOVATION

COST

PROFIT?PROFIT

MAINTENANCE CREATES VALUE!

ASSET LIFE CYCLE

PROFIT

58

59

Efficient spare parts management Conclusions

Efficient spare parts management – 8 rules

Preventive maintenance Smooth SP processes

Segment your SP portfolio Assess criticality

Good forecastingSpecial methods for

intermittent demand items

Life cycle thinking Good information system

60

Good information system for spare parts management

Quantitative methods

Common sense

Uncertainty

Maximize!

Make efficient!

Minimize!

ForecastingInventory levels

Ordering

Input of technicians and procurement

Criticality analysis

Forecast accuracyand reliability

61

Efficient Spare Parts Management

MAINTENANCE VOLUME

SPARE PARTS INVENTORY

MAINTENANCE VOLUME

SPARE PARTS INVENTORY

62

Thank you

Tomas HladikLogio s.r.o.Prague, Czech Republicwww.logio.czhladik@logio.cz